US Imposes Export Restrictions on Taiwan Semiconductor's AI Chips Amid Global Semiconductor Market Concerns

The US Department of Commerce has implemented export restrictions on Taiwan Semiconductor Manufacturing Company (TSMC) for exporting 7-nanometer AI chips to China. The restrictions aim to suppress and contain semiconductors to China, disrupting the global semiconductor market and violating international economic and trade rules. The move is seen as a blatant interference with free trade and a non-market practice, which will severely harm all parties involved and hinder global technology exchange and economic cooperation.

The US Department of Commerce has implemented stringent export restrictions on Taiwan Semiconductor Manufacturing Company (TSMC), prohibiting the export of 7-nanometer AI chips to China. This move aims to suppress and contain semiconductor technology to China, disrupting the global semiconductor market and potentially violating international economic and trade rules. The restrictions are seen as a blatant interference with free trade and a non-market practice, which could severely harm all parties involved and hinder global technology exchange and economic cooperation.

TSMC, the world's largest contract chipmaker, has been notified that its "validated end-user" (VEU) authorization for its Nanjing site will be revoked effective December 31, 2025 [1]. This action mirrors previous steps taken by the US to revoke VEU designations for China facilities owned by Samsung Electronics Co. and SK Hynix Inc. [1]. TSMC's VEU status was never published in the federal register, unlike the other affected companies, but the net effect is the same: suppliers to TSMC's China facilities will need to proactively seek US licenses for shipments of goods covered by US export controls [1].

The impact on TSMC and its suppliers is significant. TSMC's top machinery suppliers, including Applied Materials Inc., ASML Holding NV, Tokyo Electron Ltd., and KLA Corp., will face additional hurdles in working with TSMC in the Chinese market [1]. The revocation of the VEU status adds new restrictions to their operations and could lead to delays and increased costs in securing the necessary licenses.

The US move is part of a broader effort to limit China's access to advanced semiconductor technology. The Commerce Department's Bureau of Industry and Security oversees semiconductor export controls and has been working on solutions to ease the bureaucratic burden, given the significant backlog of existing license requests [1]. However, the shift introduces uncertainty about wait times to actually secure those permits.

The restrictions are expected to affect the predictability of TSMC's Nanjing plant's operations, but the facility only accounts for around 3% of TSMC's overall production capacity and even lower of Taiwan's overall chip production [1, 2]. Despite this, the move could have broader implications for the global semiconductor market, as it contributes to the ongoing geopolitical tensions between the US and China.

The restrictions also highlight the extent of Washington's influence in, and control over, the supply chain for electronic components that power everything from smartphones to data centers training artificial intelligence algorithms, even when the plants in question are operated by non-American companies in a foreign country [1].

The situation underscores the complex dynamics of the global semiconductor landscape, where China's push for AI chip self-reliance collides with US export controls and strategic decoupling [3]. Investors must balance exposure to US and Chinese leaders while hedging geopolitical risks, as divergent AI ecosystems create parallel markets with distinct innovation trajectories.

References:
[1] https://finance.yahoo.com/news/us-pulls-tsmc-waiver-china-203406976.html
[2] https://www.spacedaily.com/reports/US_limits_TSMC_chipmaking_tool_shipments_to_China_999.html
[3] https://www.ainvest.com/news/china-ai-chip-reliance-geopolitical-implications-global-semiconductor-leaders-2509/